What does DCA stand for in car finance?

DCA stands for Discretionary Commission Arrangement. It was a commission model used in the UK car finance industry in which car dealers were given the power to set — or adjust upward — the interest rate on a customer's PCP or HP finance agreement, within limits set by the lender. The dealer earned more commission the higher the rate they set, creating a conflict of interest. The FCA banned DCAs from 28 January 2021.

Was I affected by a DCA in my car finance?

You may have been affected if your PCP or HP finance was arranged through a car dealer between April 2007 and January 2021. You cannot tell from your agreement alone whether a DCA applied — the commission arrangement was a private deal between the dealer and lender, not disclosed to you. To find out, submit a formal complaint to your lender requesting disclosure of whether a DCA or commission arrangement applied to your agreement.

Why were DCAs considered unfair?

The FCA found DCAs created a direct conflict of interest: dealers were financially incentivised to charge customers the highest possible interest rate, not the best available rate. Customers had no way of knowing the dealer could set their rate, or that the dealer's commission depended on how high they set it. This meant customers routinely paid more than necessary, without any disclosure or opportunity to negotiate.

When were DCAs banned?

The FCA banned discretionary commission arrangements from 28 January 2021. From that date, motor finance agreements must use fixed commission models that do not allow dealers to influence interest rates. The ban followed the FCA's 2019 review of the motor finance market, which found DCAs were causing consumer harm on a significant scale.

What is a Discretionary Commission Arrangement (DCA)?

In plain English

What is a DCA — the one-paragraph explanation

A DCA (Discretionary Commission Arrangement) was an agreement between a car finance lender and a car dealer that gave the dealer the power to set your interest rate within a range. The higher the rate the dealer set, the more commission they received. You were never told this was happening. It means millions of UK car buyers were charged a higher interest rate than necessary — not because it reflected their credit risk, but because the dealer wanted to earn more money. The FCA banned this practice in January 2021.

❌ Hidden from consumers📅 Banned Jan 2021£1,100 avg overcharge

How it worked

How DCAs operated — the mechanics

To understand why DCAs were considered harmful, it helps to understand exactly how car finance worked before January 2021.

How a DCA worked — the three-party relationship

The lender

e.g. Black Horse

Sets rate range: 5%–15% APR

Commission deal

⇌

Dealer can set any
rate within the range

The dealer

e.g. Ford Dealer

Sets your rate — earns more
if rate is higher

You (the customer)

Paid 9.9% APR

Never told the dealer set your rate
or earned commission from it

↑

Could have been
offered 5% APR

What you weren't told

Dealer earned £600+ commission

For setting your rate
above the minimum

The key issue: the dealer was supposed to be helping you find the best finance — but their financial incentive was to charge you as much as possible. This is a clear conflict of interest that the FCA found was causing widespread harm.

❌ What was wrong with DCAs

Dealers had a direct financial incentive to charge you a higher interest rate — the opposite of acting in your best interest

Customers were never told the dealer could influence their interest rate

Customers were never told the dealer earned commission, or that the commission was higher for higher rates

This made it impossible for customers to challenge, negotiate, or seek a better rate elsewhere

The FCA found this caused an estimated £300m+ in excess interest charges per year

✅ What replaced DCAs (post-January 2021)

Since January 2021, motor finance commissions must be fixed (flat fee or fixed percentage of loan), regardless of the interest rate agreed. Dealers can no longer earn more by setting a higher rate. This doesn't help people who took out agreements before January 2021 — but it ensures future finance is arranged fairly.

Were you affected?

How to know if your car finance included a DCA

You cannot tell from your agreement alone. The DCA was a private arrangement between your dealer and the lender — your agreement would simply show an interest rate, with no mention of how it was set or what commission the dealer earned.

✅ More likely to have been affected

Finance arranged through a car dealer (not directly with a lender online or by phone). Agreement between April 2007 and January 2021. Finance from major lenders: Black Horse, Santander Consumer, Close Brothers, MotoNovo, Moneybarn.

❌ Less likely to have been affected

Finance arranged directly online or by phone with a lender (without dealer involvement). Agreements from January 2021 onwards. Personal loans from a bank (not car-specific PCP/HP finance).

💡

The only way to confirm is to ask your lenderSubmit a formal complaint or Subject Access Request to your finance provider asking whether a DCA applied to your agreement. They must disclose this. Many people who didn't think they had a claim have discovered their agreement did include a DCA once they asked.

Next step

Use our free PCP calculator to estimate your compensation

Our calculator uses the FCA's published average DCA uplift of 25% of total interest charged to estimate how much you may have been overcharged. Enter your agreement details to get an instant estimate:

🧮

Free PCP Compensation Calculator →Enter your finance amount, APR, and agreement year for an instant estimate based on FCA methodology. Use the calculator at the PCP hub →

FAQs

DCA — frequently asked questions

What's the difference between a DCA and a flat-fee commission?+

A DCA linked the dealer's commission to the interest rate they set — more interest = more commission. A flat-fee commission pays the dealer the same amount regardless of the rate. The FCA found DCAs harmful because they created a conflict of interest; flat-fee commissions do not, because the dealer has no incentive to set a higher rate. All car finance from January 2021 onwards must use commission structures that don't link commission to the interest rate.

Did all lenders use DCAs?+

No — not all lenders used DCAs, and not all dealer-arranged finance included them. The FCA's 2019 review found DCAs were widespread but not universal. Major lenders confirmed to have used DCAs include Black Horse, Santander Consumer Finance, Close Brothers Motor Finance, and MotoNovo. Some lenders used fixed-commission models throughout. The Supreme Court's 2024 ruling broadened the scope beyond DCAs to all undisclosed commission arrangements.

Is DCA the same as PCP mis-selling?+

Not exactly — DCA is the specific commission mechanism; PCP mis-selling is the broader claim. Your PCP (Personal Contract Purchase) agreement could have been overpriced due to a DCA. But the mis-selling claim can also arise from other undisclosed commissions that don't technically qualify as a DCA. Following the Supreme Court's ruling, the scope is wider than just DCA agreements — any undisclosed commission that created a conflict of interest may be actionable.

What happened when the FCA banned DCAs?+

From 28 January 2021, lenders were prohibited from entering into DCAs for consumer credit agreements. Agreements already in place were not affected in terms of their ongoing payments, but the ban stopped new overcharges from accumulating. In January 2024, the FCA launched its formal motor finance review to assess how to compensate consumers who were overcharged under DCAs before the ban. This led to the Supreme Court ruling in October 2024 and the development of a formal consumer redress scheme.

Related guides

Continue exploring PCP claims

Disclaimer: This guide explains DCAs in general terms. Whether your specific agreement included a DCA can only be confirmed by your lender. This is not legal advice. Always consult a specialist before making a formal claim.